The New Year will be here in just a few days, and before the ball drops and rings in 2012, you still have a few days to make some last minute 2011 tax adjustments.
The following four money-saving tips will help you reduce your overall 2011 tax bill.
Make a charitable contribution
In order to qualify for a charitable deduction, your donation must be made to a qualifying charity by December 31. Deductions to charities can be claimed only if you are itemizing your deductions, meaning your itemized expenses exceed your standard deduction. For cash donations, you must have a canceled check, a bank statement, credit card statement or a written statement from the charity showing the charity name, the date and amount of the contribution.
Too, if you are age 70 1/2 or over, qualified charitable distribution rules allow you to make a distribution directly from your individual retirement account to a qualified charity, and exclude the amount from gross income. The maximum annual exclusion is $100,000.
Install energy-efficient home improvements
It may be tough to find a contractor during the holiday weeks, but you still have time to make energy-saving and green-energy home improvements and qualify for either of two home energy credits. Insulation, new windows, furnaces and water heaters can kick back up to $500 in tax credits. Larger improvements may qualify under the Residential Energy Efficient Property Credit for up to 30 percent back.
Take stock of your stock
Having a poor year performance-wise with your portfolio? Consider selling before the year closes. Capital losses can generally be deducted up to the amount of capital gains, plus $3,000 from other income. If your net capital losses are more than $3,000, remember too that the excess can be carried forward and deducted in future years.
Put away the max into your IRA
According to the IRS, elective deferrals you make to employer-sponsored 401 plans or similar workplace retirement programs for 2011 must be made by December 31. However, you have until April 17, 2012, to set up a new IRA or add money to an existing IRA and still have it count for 2011.
You normally can contribute up to $5,000 to a traditional or Roth IRA, and up to $6,000 if age 50 or over. The Saver’s Credit, also known as the Retirement Savings Contribution Credit, is also available to low- and moderate-income workers who voluntarily contribute to an IRA or workplace retirement plan. The maximum Saver’s Credit is $1,000 ($2,000 for married couples).